Blog: 18 January 2018What does the future hold for industrial land?

No doubt many of you chose to avoid the hustle and bustle of the high street on the lead up to Christmas; instead preferring to order online from the comfort of your own home in the hope that your gifts arrive promptly to prevent any empty-handed embarrassment on the big day itself. The resultant growth in e-commerce was well documented over the festive period with figures published showing the online behemoth, Amazon, alone acquired 4 million ft2 in the UK in 2017: five times more space than its closest rival. However, the rapid take-up of available sites; the government’s proposed legislation geared towards combating the UK’s housing crisis; and no indication of any significant relaxation of Green Belt policy when the amendments to the National Planning Policy Framework are consulted upon later this year, all come together to create a perfect storm that will exert pressure to release further industrial land for housing. So, looking ahead, how will this booming sector adapt to the increasing competition for land in urban areas?

There is an indication in the Draft London Plan, published at the end of last year, that things are changing when it comes to urban logistics. Here, the messages relating to concerns over the rate at which industrial land is being lost, appear to be getting through to policy-makers who are now seeking to set the right conditions to support the needs of operators.

In ‘A City for All Londoners’ Sadiq Khan acknowledged that ‘mistakes have been made in the past when planning development in big cities, in cases where governments have myopically focused on one amenity without seeing the bigger picture’. This statement is particularly pertinent given the Government’s current prioritisation of housing delivery; much of which is proposed, or being delivered, on former industrial sites. Once lost, this industrial land is notoriously difficult to compensate for elsewhere for a variety of reasons, such as amenity issues. This can result in an imbalance between housing and employment that is not conducive to the ‘Good Growth’ agenda being promoted by the Mayor. Indeed, the scale of this issue was quantified in the frequently referenced London Land Supply and Economy Study 2015, which found that 1,300 hectares of industrial land in London was transferred to other uses between 2001-2015; representing a 16% contraction over that period. It warned that, if this rate of loss were to continue into the future, levels of industrial land would reach critical levels that could lead to difficulties in market operation.

The Draft London Plan has responded to the above by taking on board the recommendations contained in the CAG Consultants ‘London Industrial Land Demand’ Report (June 2017), which assessed the amount of industrial land that London is required to maintain to ensure it functions as a successful and sustainable city. As such, the Report represents an important evidence base document that underpins and gives direction to future economic policy.

The CAG Report recommended that the London Boroughs should, inter alia:

create additional capacity through intensification of existing sites (more capacity on the same quantum of land);

consider industrial demand at the level of the sub-regional property market area (i.e. balancing gains and losses between boroughs);

use Article 4 Directions to protect employment uses, where appropriate.

As a result of the Report’s findings, the general approach in London has changed from one of managed release of industrial land in the current London Plan to a more protectionist stance over the level of industrial floorspace in the Draft London Plan. The latter seeks no net loss of industrial floorspace capacity (and operational yard space capacity) within Strategic Industrial Locations (SILs) and Locally Significant Industrial Sites (LSISs). The emerging policies advise that the retention and provision of additional industrial capacity should be prioritised in certain locations, including those that can accommodate urban logistics to support large-scale residential or mixed-use developments. Brownfield sites that offer a 30-minute drive time access to inner cities are particularly attractive and a new lease of life has been given to industrial sites that were previously considered functionally obsolete and are now being re-developed as ‘first generation’ urban logistics facilities. The Draft London Plan goes on to state that, where industrial land is proposed for release, it should be facilitated through industrial intensification, co-location and substitution. Accordingly, draft Policy E7 provides detailed policy guidance on the measures that can be implemented to facilitate these processes and we are already seeing this take place in locations such as Hounslow where land is scarce, and rents are high.

My view is that these principles should be welcomed and applied more widely as they not only acknowledge the need to maintain a balance between housing and employment, as a central tenet of ‘Good Growth’, but they also recognise the operational requirements of urban logistics operators. For me, this should go further still, and new large-scale masterplans should incorporate last mile solutions to serve the newly created residential areas thereby supporting a sustainable pattern of development. Only time will tell whether other Combined Authority areas, such as those in the Midlands and Manchester, follow London’s lead in terms of protecting the existing quantum of industrial floorspace in urban locations (if viability allows for this, of course). Maybe they feel they are not at the stage where this level of policy intervention is necessary, but, as stated above, the push for increased housing delivery is likely to result in a rapid erosion of employment sites within their urban areas and, before you know it, there is a lack of sites to perform the important ‘last mile’ function. My concern is that intensification is not the panacea. It can only go so far and does, of course, require the strong protection of key existing employment sites as an essential pre-requisite. Look out for my next blog, exploring the solutions to these issues.